The great fear of any president running for reelection is being found naked in bed with a dead economy — or, to be less extreme, trying to convince the voters to give him another four years when we’re in a recession. Things are looking pretty good for President Trump, then, as all the signs show that the lockdown and the coronavirus-induced recession are going to be over by the time voters start making their ballots.
The fear of running for reelection when the economy is dire is well founded. That’s what did in Presidents George H.W. Bush and Jimmy Carter. President Gerald Ford wasn’t exactly running in the happy times, nor was President Lyndon B. Johnson when he decided not to run. President Herbert Hoover would be a prime example too. It’s important to note, though, that what matters is not whether there has been a recession, but is there one when people are voting? It’s actively feeling the slowdown that changes votes, not that things could be better. What happened before is much less important than the growth and improvement people feel now.
This is why an 18% jump in retail sales is a good sign for Trump. Sure, we know, we’re still in a terrible economic slump. It’s one of the fastest and deepest falls in economic output ever, certainly since reliable records started to be kept a century or so back. If we judged and voted purely on economic record, this would be depressing for those who lean toward Trump in November, even if it’s not actually anyone’s fault. But as best we know, that’s not quite the way it does work — it’s how people feel the economy is on Election Day that does. Growth is growth, even if there’s been a slump.
Thus, the big question is: How long is this all going to last? Will the recession be V-shaped (we’ll be back to where we were right away) or W-shaped (some bumbling around and then back to where we were) or L-shaped (we’re screwed)?
All the numbers that we’re getting out of the economy point to a V-shaped recovery. Yep, it’s terrible now, but it’ll soon be growing again and fast.
The savings rate jumped to an unheard of 33%. Everyone was paying off revolving debt (essentially, outstanding credit card balances). If everyone keeps doing that, then there won’t be a recovery at all, and the economy will be that awful L-shape. But that’s not what’s happening. As soon as the stores are open again, we’re out there like it’s Black Friday. OK, maybe it’s not quite that good, but we’re only 6% below peak, and not every state is properly open yet. The considered prediction of the nation’s economists was that we’d see an 8% rise in retail sales in May, and clearly, 18% just blows that out of the water.
The vast majority of us vote with our pocketbooks. It’s also not how the trailing economic statistics are recording what has happened that matters; it’s our own direct experience of jobs and pay and layoffs and being able to go to buy what we want. It’s also not what has happened, but what is happening around Election Day that changes electoral outcomes. If this recovery keeps going gangbusters like it seems to be, then Trump is going to get his four more years.
Maybe that’s why they’re allowing Joe Biden to run on the other side this time — his possible lapses don’t actually matter; the economy does.
Tim Worstall (@worstall) is a contributor to the Washington Examiner’s Beltway Confidential blog. He is a senior fellow at the Adam Smith Institute. You can read all his pieces at The Continental Telegraph.
